Sunday, November 18, 2012

A few nights
ago, I asked Hank Paulson, the United States Treasury Secretary during the
financial crisis of 2008-9 and former Goldman Sachs CEO, the Peak/End question.

Having used
the Peak/End question many times before, I knew that it has broader application
than the narrower definition in The Peak Interview book. In the job
interview context, the question is designed to create a real peak for the
person answering the question. I was actually hoping it would turn
out that way last night, but by the time I got to ask the question I suspected something else would happen, and
it did.

The other
night’s topic was US-China relations in 2013 and beyond. When
Paulson was with Goldman Sachs, he made upwards of 70 trips to China and has
close personal relationships with the past and current leadership. He
has established the Paulson Institute at the University of Chicago to promote
international engagement on issues of global scope, with particular focus on
cooperation between the United States and China. However, in his
introductory talk he made it clear that he would also be happy to talk about
his role in the financial crisis of 2008.

One way or
another Mr. Paulson is doomed to be remembered primarily for his actions during
the five days of turmoil between September 15 and September 19, 2008. That
he would bring it up himself hinted that he wanted to talk about it.

During his
talk, I also observed a number of behaviors that are classic signs of struggles with the truth. At one point, he answered a question by saying
“No” while nodding emphatically. He
shrugged while talking; he smiled moments when it seemed inappropriate to do so,
etc.

I don’t mean
to suggest that Mr. Paulson is dishonest.
Rather, I had the impression that perhaps he is at war with
himself. Given the prominence in his
life of those five days in 2008, and his apparent desire to talk about them, I
can’t help but wonder if that’s what the war is about.

It is said
that events are neutral, yet what we live are the stories we tell ourselves and
others about those events. Those stories
are part of how we create the identity that we want others to have of us, and that we
want to have of ourselves. They often
are how we make ourselves feel better about the events we’ve precipitated.

The Peak/End
question is simply this: “You’ve had an interesting career. Looking
back through that career, what is the one thing you’re most proud of?”

Mr. Paulson
has done lots of things in his life that must have had clear and unambiguous
benefits to people. He’s been very active in conservation and has no
question that global warming is real and manmade. He has helped
establish nature preserves and national parks in China. He has
already donated in excess of $100 million to conservancy causes and has pledged
his entire fortune to the effort upon his death (why people don’t do this when
they are alive is a mystery). This is clearly a huge priority for
him. In answer to the question I thought he might have gone
there.

He also must
have been involved in at least one transaction at Goldman Sachs that
had positive human consequences in the face of many that probably didn’t. But he did not go there either.

Instead he
went to his role in the financial crisis as his best moment. It is
possible that those five days in 2008 sustain an identity crisis for
Paulson. No matter how many times he says he chose the best possible
action to avert a global meltdown of the financial system (which may be true),
the fact will remain that the most obvious direct beneficiary of his action to
bail out AIG was Goldman Sachs, his former employer and the source of his
extraordinary wealth.

Psychologically,
if you say something often enough it becomes your truth, your story. Perhaps
that is what he is doing. Honestly, I feel badly for him
because if he has this identify crisis, it is irresolvable. Nothing
will change the simple fact that his action saved Goldman Sachs.

Paulson
mentioned the quandary of a counterfactual. The economic collapse
that he believes his action avoided is a counterfactual. That is, we cannot know that a worse crisis would
have occurred if he had acted differently.
Equally counterfactual is an outcome that might have turned out better,
not for Goldman Sachs, but for millions of people who saw much of their savings
and none of their debt disappear in the crisis. For Paulson, hanging his
identity on this moment will always be murky.

Perhaps he
would be happier if he could just let it go, be satisfied that perhaps he did
his best, and leave the learning to others. Then, he could choose something
else as his proudest moment. He has many
such moments from which to choose.

The Peak/End
question usually will help you see who a person really is. Unlike Paulson,
almost everyone else answers the Peak/End question by telling a story about the
impact their action had on specific other people. For example, yesterday I attended a
presentation a fellow gave regarding the recent sale of the company he’s run
for several years. He talked about all
the difficulties and frustrations and risk associated with such a transaction.
Toward the end of the question period I asked him a version of the Peak/End
question, “Through the months of this transaction, what was most gratifying to
you personally?”

He didn’t
hesitate for a moment. “Well, after the
transaction was complete I was shocked to learn the new owners were planning to
let go five of our managers. This was
unexpected and would have been devastating to those people. I argued with the new owners and managed to
convince them not to do that. And I have
to tell you, that gave me such a wonderful feeling … you know it’s one of those
great moments in life to be able to do something good for someone else, even
though they’ll never know it.”